The Fiscal Fitness Podcast, Episode 54: Cognitive Biases and How They Affect our Spending (Part 2)

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This episode is part two of our six-part series on cognitive biases and how they affect our spending habits and financial decisions. (Make sure you check out part 1 if you haven’t yet.) In this episode, we discuss how the Availability Heuristic bias is impacting the way we think of ourselves as money managers.

In this episode, you will learn:

The Availability Heuristic – what it is and how it’s being used to affect your decision-making
How it shows up on a regular basis
How it’s impacting the way you think of yourself as a money manager
How you can overcome this bias

How to overcome the availability heuristic:

ASK YOURSELF—> What do your older memories say about how you are as a money manager? What do your newer/more recent memories say about how you manage your money? How are you allowing these older memories to influence your current decisions? What decisions have you made recently without looking to statistics – or using your budget?
Surrounding yourself with people doing GOOD THINGS FINANCIALLY will actually lead you to believe it’s more likely to happen to you. Surrounding yourself with people doing BAD THINGS WITH MONEY will influence your belief around the likelihood that you will too.
Ask yourself if your fear or belief has any basis in statistics? This is also why we look at our budget to make a decision. If we have been in the repeated position on not being able to afford things, it is likely then that when we have to make a decision, we assume we will not be able to afford it – that’s the most likely outcome simply because we remember all the times we haven’t been able to afford it- they are emotionally more memorable than being able to buy something.